VietNamNet Bridge – The inconsistent and changeable investment policies have been making foreign investors hesitate to invest in Vietnam.

The Korean Chamber of Commerce and Industry (KoCham) has sent a document to the Minister of Finance Vuong Dinh Hue, complaining about the unclear tax policies applied to the machine and equipment imports to Vietnam, according to Dau tu newspaper.

Local customs agencies have recently asked South Korean companies to pay import tax for the machines and equipments listed in the tax-free list. The products have been imported under the name of finance leasing companies – the companies that come forward to import equipments to lease to KoCham’s member companies.

According to KoCham, the government Decree No 16 stipulating the regulations on the operation and organization of finance leasing companies pointed out that in case finance leasing companies import products to re-lease to other companies, the import tax rates would be the rates stipulated for the products imported directly by companies.

The Ministry of Finance, in the Circular No 24, which stipulates the tax duties for finance leasing companies, also showed similar regulations.

However, though the two legal documents are still in validity, the General Department of Customs still asks local customs departments to collect import tax on the equipments – the tax-free subjects.

KoCham many times lodged complaints to the Ministry of Finance, but it has not got reply from the ministry. Therefore, the chamber has decided to lodge a complaint again directly to the head of the ministry.

In the document sent to the ministry, KoCham’s Chair Kim Jai Woo emphasized that the problem has raised doubts about Vietnam’s investment incentive policies among foreign investors. They do not know whether they should scale up their business in Vietnam, because they are not sure if the current policies would change in the near future.

He went on to say that unpredictable and changeable policies have forced foreign investors to bear additional expenses, and made it impossible to control the investment costs in Vietnam.

Thoi bao Kinh te Vietnam some months ago once quoted some foreign investors as saying that the Decree No 124 guiding the implementation of the Corporate Income Tax has “problems”. The decree stipulated that the enterprises investing in industrial zones would no more enjoy the corporate income tax and import tax incentives, which has discouraged foreign investors.

The removal of the tax incentives has not only put difficulties for foreign investors, but also made local authorities suffer. The reports by local authorities have shown that the investment capital in industrial zones has dropped dramatically after the new regulation was issued.

The regulations relating to the compensation fee for site clearance in accordance with the Decree No 69 have also been cited as unexpected policy changes, which would affect the expenses of foreign invested enterprises.

Some months ago, the complaint about the changeable policies came from automobile manufacturers. Local authorities in big cities unexpectedly raised the vehicle ownership registration taxes. The Ministry of Industry and Trade tightened the control over car imports by releasing the Circular 20 with the requirements which car dealers believed would not be satisfied by anyone.

Michael Behrens, General Director of Mercedes Benz Vietnam said on Dau Tu that automobile manufacturers need stable long term policies to feel secure about their long term investment plan in Vietnam. Meanwhile, the policies relating to the automobile industry have been changing so regularly in the last few years.

He has warned that the investors, who are considering investment opportunities, may head for more stable markets than Vietnam.

Compiled by C. V